Highmark sues over reduced ACA risk-corridor payments

Highmark is suing the federal government for $196 million in risk-corridor payments it says agencies are required to pay out under the Affordable Care Act, despite funding constraints put in place by Congress.

Risk-corridor payments were one of several insurance risk programs designed to smooth the transition to the ACA marketplaces and mitigate losses in the early years of the exchanges. For three years, insurers would either collect or pay into the program, depending on the difference between their allowable costs (such as claims) and their premiums minus administrative expenses, including profit.

CMS had announced in October 2015 that it would only pay $362 million of the $2.9 billion requested for the 2014 benefit year. At the time, The Washington Post quoted a CMS official who said it was up to Congress as to what the agency could pay in future years, after the 2015 funding bill for HHS required the program be “budget neutral.”

The suit argued the government had previously promised to make the payments in full, even if insurers were owed more money than what had been collected from insurers making profits off the exchanges.

“The government arbitrarily has paid (Highmark) only a pro-rata shareless than 12.6 percentof the total amount due, asserting that full payment… is limited by available appropriations, even though no such limits appear anywhere in the ACA or its implementing regulations,” the complaint said.

The suit went on to say that Highmark made several attempts to settle the dispute out of court, but HHS and CMS responded by saying full payment would be delayed until later in 2016 or 2017, along with the full payments from years two and three of the program. Highmark estimated it will be owed more than $300 million just for the 2015 benefit year.

The insurer is asking the court to force the agencies to pay $196 million, the remaining amount of the nearly $223 million Highmark had originally requested through the program for its first year.

This isn’t the first legal action involving risk-corridors payments. Health Republic Insurance of Oregon is seeking class-action status for a suit claiming the government withheld funds from insurers through the program. 

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John Gregory, Senior Writer

John joined TriMed in 2016, focusing on healthcare policy and regulation. After graduating from Columbia College Chicago, he worked at FM News Chicago and Rivet News Radio, and worked on the state government and politics beat for the Illinois Radio Network. Outside of work, you may find him adding to his never-ending graphic novel collection.

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